ACCOUNTING RECORDS JOURNAL

Steps in the Accounting Cycle 1. Collect and analyze info 7. Close the accounts 2. Journalize transactions 6. Record and post adjusting entries 3. Post transactions to general ledger 5. Prepare financial statements 4. Prepare work sheet LO6

Journalize transactions Journal: mean a day book or daily record. the transactions are first recorded in chronological order (as and when they take place). It is a book of prime, original or first entry. Journal is helpful in the preparation of accounts in the ledger

Format of Journal The process of recording transactions in journal is termed as “Journalizing”. The General Journal [ Journal ] identifies which accounts are going to be debited and which accounts are going to be credited and creates a complete record of this information.

Source documents Business need to have a proof of transactions that occur. Every business transaction is initially recorded on a Source document A S.D is a point of original entry of a transaction & should provide the information necessary to record the transaction accurately.

There are 3 rules for recording the transactions Personal Accounts Debit The Receiver Credit The Giver Real Accounts Debit What comes in Credit What goes out Nominal Accounts Debit Expenses and losses Credit Income and gains

POINTS TO BE NOTED WHILE PASSING JOURNAL ENTRIES The various accounts are classified into 5 categories: 1) Assets Account 2) Liabilities Accounts 3) Capital Accounts 4) Expenses and losses Accounts 5) Income and Gains Accounts

COMPOUND ENTRY When ever two or more transactions of the same nature (i.e. transactions where either the account to be debited or the account to be credited is common) take place on the same date a composite or compound or combined journal entry may be passed for them instead of passing separate journal entry for cash of them.

Illustration Let us Journalize the transactions: